Hodges and Hodges

[2007] FamCA 1091

FAMILY COURT OF AUSTRALIA

HODGES & HODGES [2007] FamCA 1091

FAMILY LAW – COSTS – Applications for costs by wife and interveners against each other – Wife seeks costs on indemnity basis – Wife’s application granted – Interveners’ application dismissed.

APPLICANT: Ms Hodges

RESPONDENT: Mr Hodges

INTERVENERS:

W Nominees

Ms O
Estate of H (deceased)­
Ms L
Ms J
Ms T
Mr Y
Mr S
G Lawyers

FILE NUMBER: ADF 3134 of 2002

DATE DELIVERED: 8 August 2007

PLACE DELIVERED: Adelaide

JUDGMENT OF: Strickland J

HEARING DATE: 8 August 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Pyke QC

SOLICITOR FOR THE APPLICANT: Norman Waterhouse

COUNSEL FOR THE RESPONDENT: Mr Holland

SOLICITOR FOR THE RESPONDENT: Howe Martin & Associates

COUNSEL FOR THE INTERVENER: Mr Healy

SOLICITOR FOR THE INTERVENER: O’Loughlin Lawyers

ORDERS

1. That the intervener applicants pay the wife’s costs on an indemnity basis subject to the following:

   a.That no costs be allowed beyond the first day of the hearing;

   b.That this matter is not certified fit for Senior Counsel;

   such costs to be taxed or agreed.

2. That the application for costs by the intervener applicants be dismissed.

3. That the Form 2 Application filed by the intervener applicants on 29 June 2007 (Folio 134) be dismissed and removed from the active pending cases list.

4. That the Form 2 Application filed by the intervener applicants on 29 June 2007 (Folio 131) be dismissed and removed from the active pending cases list.

IT IS NOTED that publication of this judgment under the pseudonym Hodges & Hodges is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADF 3134 of 2002

MS HODGES

Applicant

And

MR HODGES

Respondent

And

W NOMINEES

Ms O
ESTATE OF H (DECEASED)
Ms L
Ms J
Ms T
Mr Y
Mr S
G LAWYERS

Interveners

EX TEMPORE REASONS

1. I have applications for costs before me in relation to the two Form 2 Applications filed by the interveners.  In relation to the Form 2 Application filed by those interveners who I will describe as creditors, that application has been resolved by way of an order made yesterday, wherein the creditors are to be paid from money held in an account by the husband and wife as trustees for the company which owes money to each of those creditors.  The application for costs in relation to that Form 2 Application is an application by the interveners against the wife.

2. The other application is the application by the wife seeking costs in relation to the proceedings commenced by the interveners, who I will describe as the beneficiaries.  That application was filed on 29 June 2007 and it is document number 134 in the court file.  That application sought an order that the husband and the wife remit to the trustee of the Hodges Family Settlement the total balance of the moneys held by the wife and the husband, as trustees for the trustee, in an HSBC account.

3. That application was supported by an affidavit of one of the beneficiaries, namely Ms T.  Also before me in respect of that application was an affidavit by the husband, which I will come to in a moment.  I am going to deal with that application for costs first and then I will deal with the application by the interveners in relation to the other Form 2 Application.

4. The application by the beneficiary interveners was opposed by the wife, and she filed an affidavit on 27 July 2007, which indeed was her affidavit of evidence‑in‑chief in relation to all matters in issue in these proceedings, in which she addressed this Form 2 Application and specifically in paragraphs 384 to 393.

5. That Form 2 Application proceeded to a hearing, which commenced before me on Monday this week.  All matters were before me last week when it was determined that the interveners' applications, being this application and the other Form 2 Application, would proceed discretely and I would hear the evidence and hear submissions and then deliver a judgment.  Then once my decision was known we would move to the property settlement applications between the husband and the wife.

6. For the purposes of the hearing of both Form 2 Applications, I made orders on 25 July 2007 providing for each party to file and serve a summary of argument document at least two clear business days prior to the commencement of the trial.  That order was complied with by the interveners; however, it was not complied with by the wife, or the husband for that matter.  The wife filed what is described as an outline of case document on the afternoon of last Friday.  The husband likewise filed an outline of case document last Friday.

7. The application for costs that is made by the wife is primarily against the interveners, although Ms Pyke QC has explained to me that the application also seeks an order against the husband in the event that the orders that the wife seeks by way of costs against the interveners are not made, or are not made to the full extent that the wife seeks.

8. I will briefly mention the husband's position.  In relation to the application by the interveners the history of that is quite clear on the documents.  Initially the claim by the interveners was made by way of a letter in March 2007 sent to both the husband and the wife through their solicitors.  The wife's solicitors duly responded, saying they did not accept the claim and in effect indicating that the matter would have to proceed to a hearing.  The husband’s solicitors responded briefly by saying that the husband had taken advice from counsel and it was the husband's position that the interveners' claim was “unassailable”.

9. In the husband's affidavit filed on 29 June 2007 he records the factual history of this matter and in paragraph 5 he says that in his capacity as sole director of the trustee he did not make any determination either pursuant to clause 2(a)(i) of the trust deed, "to accumulate the whole or any part of the income of the trust for the income year ending 30 June 2004" or, pursuant to clause 2(a)(ii) of the trust deed, "to pay the whole or any part of the income of the trust for the income year ending 30 June 2004 to the income beneficiaries (as defined in the trust deed)".

10. Then he says in paragraph 6, "As a consequence of those matters, and by virtue of clause 2(a)(iii) of the trust deed, the income of the trust was held by the trustee in trust for the default income beneficiaries as the parties beneficially entitled to it."

11. The implication from paragraphs 5 and 6 is that the husband still maintains his position that the claim by the interveners is unassailable.  At trial, though, his counsel was at pains to indicate to me that his client was sitting on the fence because of his position as a sole director of the trustee.

12. To return to the application and how it has progressed, as I say, the hearing commenced on Monday of this week.  Evidence was received, although there was no cross examination of any of the witnesses.  Then we moved to submissions and it was at that point that the wife's junior counsel, Ms McDonald handed up a written submission described as "Outline of submissions of the wife with respect to third party default beneficiary claims".

13. I granted an initial adjournment for the interveners' counsel to consider that document, but when we resumed further time was asked for and I readily granted that and the matter was adjourned to Tuesday.  When the matter was called on on the Tuesday, apart from initially when Ms McDonald handed up a further document - namely, a case that she relied upon - Mr Healy indicated that he had instructions from his clients to withdraw their application.  Ms Pyke, Senior Counsel for the wife, indicated that on that basis an application for costs would be made, and the matter was adjourned to 2:15pm on that day to hear argument.  At that time I heard the submissions of the parties and I also heard argument in relation to the application for costs by the creditor interveners in relation to the other Form 2 Application.

14. In terms of the amount of costs sought by the wife, I have been provided with a summary which totals $35,640.00 inclusive of GST.  In terms of the split‑up of that amount there are firstly solicitors' fees of $8000.00.  There is no itemised bill in relation to that item, though.  Ms Pyke's counsel fees are $8000.00 and there is some detail provided as to the work she has done.  Then with junior counsel, Ms McDonald, the amount for her is $18,040.00 and there is what is described as a summary of attendances attached which sets out the work that Ms McDonald has done in terms of the hours spent and charged at a rate of $440.00 per hour inclusive of GST.

15. That application for costs is opposed.

16. Ms Pyke has taken me to Section 117 of the Family Law Act and identified the relevant matters to be addressed in Section 117(2A). Looking at those matters now, pursuant to subparagraph (a) I have to have regard to the financial circumstances of each of the parties to the proceedings. I am aware of the wife's financial circumstances but there is no evidence before me as to the interveners' financial circumstances. Indeed there was no attempt to put any information about that before me, and no adjournment was sought for that purpose. I take it from that that if there was anything significant or relevant to put to me in that regard Mr Healy would have done so.

17. Subparagraph (b) is not relevant, as I understand it, but subparagraph (c) is a paragraph that Ms Pyke relies on.  That relates to the conduct of the parties to the proceedings.  It is not, though, general conduct; it is conduct in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of fact, production of documents and similar matters. 

18. It is common ground between the parties that subparagraph (d) is not a relevant factor.  However, subparagraph (e) is highly relevant, and in my view is the most relevant.  I will come back to that.  Subparagraph (f), is not relevant, and with subparagraph (g), Ms Pyke did not specifically address me in relation to that although Mr Healy did raise some issues which would conceivably come within that catch‑all subparagraph.

19. Thus the primary basis for the application for costs is subparagraph (e) and in that regard it is perfectly obvious that the interveners have been wholly unsuccessful in the proceedings.  Mr Healy put to me that there is a difference where a party withdraws an application as opposed to, for example, where the application proceeds to a hearing and there is a decision and order made. However, in my view there is no difference.  The interveners, as Mr Healy has said - and I agree with him to this extent - took the right course, from their point of view, to try and save costs and they brought the proceedings to a conclusion by withdrawing their application.  Certainly credit can be given to the interveners for taking the position they did at the time that they did, but the fact of the matter is they still have been wholly unsuccessful in the proceedings.  For that reason alone - and there need not be any other reason - that is a matter or circumstance which justifies this court making an order for costs in favour of the wife.

20. Mr Healy has referred me to Section 117(1) of the Act which provides that each party to the proceedings shall bear his or her own costs, and there is High Court authority which confirms that as being the primary position in any matter in this court. However, as Section 117(1) provides, it is subject to subsection (2) and subsection (2) says:

    If, in proceedings under this act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable rules of court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.

21. This is a case, to repeat, where there are circumstances that justify an order for costs, namely, the interveners have been wholly unsuccessful.  They are the ones who took the application.  They are the ones who promoted it to a point where it reached a hearing.  The wife was called upon to answer it, and, in the final analysis, her position was proven to be correct.  However, in doing that - namely, in opposing the application - she has incurred substantial costs.  In those circumstances, I have no difficulty in making an order for costs in favour of the wife.

22. In terms of the costs that should be ordered, to repeat I have been provided with a summary, but Ms Pyke seeks that any costs be paid on an indemnity basis.  Apart from opposing any order for costs per se, the interveners also oppose any costs being assessed on an indemnity basis.

23. Ms Pyke has taken me to the relevant authorities and so has Mr Healy, and in this court there are the cases of, MUNDAY and BOWMAN (1997) FLC 92-784, YUNGHANNS and YUNGHANNS (2000) FLC 93-029 and KOHAN and KOHAN (1993) FLC 92-340. The other relevant authority which Ms Pyke referred me to and which Mr Healy touched upon is a Federal Court decision of COLGATE PALMOLIVE and CUSSONS PTY LTD (1993) 46 FCR 225.

24. From those cases, there is no doubt that the ordinary rule is that where a court orders the costs of one party to be paid by another party, those costs are assessed on a party-party basis.  To depart from that ordinary rule there needs to be special or unusual circumstances which would justify a departure.

25. The category of special or unusual circumstances is not closed.  There is clear authority for that, but, helpfully, in COLGATE PALMOLIVE and CUSSONS PTY LTD, Sheppard J set out some of the circumstances which in his opinion would justify an order providing for indemnity costs.  His examples have been referred to in those cases that I have just mentioned in the Family Court and particularly by Chief Judge Holden, in MUNDAY and BOWMAN.  One of the examples given by Sheppard J and adopted, for example, by Chief Judge Holden is this:

    Where it appears that an action has been commenced or continued in circumstances where a party, properly advised, should have known that he had no chance of success, in such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts.

26. It is that example, if you like, of circumstances that might justify an order for costs to be paid on an indemnity basis, that Ms Pyke has homed in on.  Ms Pyke submits that that applies here. 

27. The history of the matter is that the initial claim was made on 14 March 2007 by letter and then the decision was made to intervene in these proceedings by way of the Form 2 Application I have referred to. 

28. From looking at the documents including the intervener’s outline of argument their case was simply to the effect that the proceeds of the sale of the property are income.  If you then look at the relevant clauses of the trust deed, that income has not been accumulated or distributed.  Therefore it belongs to the default income beneficiaries.

29. As it has turned out, and as is apparent from the extensive written submissions provided on behalf of the wife, it is nowhere near as simple or straightforward as that.  Those submissions show conclusively that the interveners simply had no case.  Indeed I take it from the fact that they have now withdrawn their claim that the interveners accept that position; although whether they do or not, even at this point, is not relevant or necessary for the purposes of this decision.

30. Mr Healy in his submissions put that that is all very well, but nowhere in the wife's responding documents was there any indication of the sorts of arguments which have now been presented.  It was only when these written submissions were provided, on the Monday, that the applicant interveners were able to take stock of their position and obtain further advice and come to the decision that they should withdraw the application.

31. Factually that is correct, because if one goes to, for example, the letter from the wife's solicitors in response to the initial claim and then one goes to the affidavit of the wife, there is simply nothing of the nature of what now appears in the written submissions addressed or flagged or identified.

32. There was of course an outline of case document, filed by the wife on Friday afternoon.  Ms Pyke has submitted that that outline of argument should have been sufficient to put the applicant interveners on notice that there were serious flaws in their case, but I disagree.  I do not consider that that very brief outline of argument goes anywhere near to the extent that is necessary (a) in terms of a proper outline of argument for the purposes of a hearing in this case, or (b) to properly alert the other side - indeed if that were the purpose of it and I am not suggesting it need be - to the flaws in their case.

33. Ms Pyke has attempted to make a distinction between the written submissions, which were presented on the Monday, and the outline of case document, which was presented on the Friday.  However, in my view the outline of case was inadequate given what appears in the submissions.  Much more could have and should have been put in the outline of case document, even from the court's point of view, in order that everyone could appreciate and understand the wife's case.  I can only speculate that if much more detail had been put in that outline of case document the case might not have proceeded on the Monday.  However, that is pure speculation. 

34. Of course, the background to that is Mr Healy's perfectly correct submission that the wife failed to comply with the order of the court.  The order was designed to ensure that each party's case was clearly set out at least two clear business days prior to the commencement of the hearing, not necessarily to put each other on notice so that they can consider their positions, although that can obviously be a consequence of it, but so that their respective cases were fully laid out and there could be no ambush once the case starts.

35. Thus to that extent I agree with Mr Healy.  However, why should it be the wife who has to point out the flaws in the applicants’ case?  The applicants started these proceedings.  Presumably they took advice; it is clear from the documents that they were represented.  It is clear to me, though, on the evidence that I have, that they did not really think about their case very much.  Very little work appears to have been done to ensure that they even had a case to argue.

36. The point that Ms Pyke quite properly makes is that the interveners could have done the same work that the wife was put to, to answer the claim.  Whether that is the fault of their legal advisers or not I make no comment on.  They clearly had access to all of the information which the wife had access to.  They could have done the same that the wife did and look more closely at the trust deed and look at the timing of events.  They did not.  They chose to file their application, proceed on a particular basis and then lo and behold, when they get to a hearing, when the flaws actually become apparent, they withdraw.

37. To suggest as Mr Healy does that that is a basis for rejecting a claim for costs by the wife is in my view not sustainable. 

38. The wife has obviously gone to enormous expense in preparing her case.  The only concern I have about her position in terms of the application for costs is what I have referred to already, namely, that to not comply with the order for the filing of the outline, and then to not include in the outline that was eventually filed sufficient detail so that everyone could be clear as to what the wife's case was has led to this case going longer than it should otherwise have.

39. To return to the question of indemnity costs, that example given by Sheppard J in my view accurately describes this case, to repeat:

    Where it appears that an action has been commenced or continued in circumstances where a party, properly advised, should have known that he had no chance of success in such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts.

1. I do not need to make any finding though about any ulterior motive.  All I need to be satisfied of is that the facts of this case provide a special or unusual feature or circumstance, such that there should be a departure from the ordinary rule.  In my view there is ample justification for not only making an order for costs but for it to be made on an indemnity basis.  However, I am not prepared to allow the wife to have all of her costs on an indemnity basis or indeed all of her costs.  I consider that if the wife had complied with the order of this court and also included the detail which should have been included in the outline of argument that this case would have concluded earlier than it has.  Thus I am not prepared to allow any costs beyond the first day of the hearing.  I consider that if the wife had done what I have indicated she should have done the matter still had the prospect of commencing on the Monday morning and continuing for some part of that day. 

2. The basis on which the costs are assessed - because I will be requiring a taxation - is still, of course, in the discretion of the Registrar.  Save and except for one other direction, I am not going to further limit the discretion of the Registrar.

3. I am concerned that Ms McDonald's costs are at the rate that they are and I am concerned about the basis of charging, in that to charge on an hourly rate for all work done may not necessarily be reasonable in all the circumstances, but I am going to leave that to the taxation officer.  However, in relation to Ms Pyke's costs, I do not consider that this is a matter that I should certify fit for senior counsel, and that is the second direction that I will make to assist the taxing officer. 

4. Ms Pyke of course appears as senior counsel but it is quite apparent that this aspect of this matter was run primarily by Ms McDonald, and ably run if I might say so.  I am not saying Ms Pyke has not had any input into that; I expect she would have, but I fail to see how the involvement of senior counsel can be justified in these circumstance. I am prepared to allow Ms Pyke's costs but not on senior counsel rates. 

5. Obviously, in the order that I propose to make I have not acceded to the wife’s application in its entirety.  In that event, as I indicated, Ms Pyke seeks an order for costs against the husband.  As much as I accept Ms Pyke's submission that the husband has not necessarily sat on the fence - indeed in the lead‑up to it he clearly did not - at trial, though, he did.  In any event I do not see any basis for an order for costs being made against the husband.  I do not see how his position, expressed in correspondence, affidavit or through his counsel, has added to the costs incurred by the wife.  I consider that the burden of the wife's costs, to the extent that I make an order in her favour, should be on the intervener applicants. 

6. Moving to the other Form 2 Application, that Form 2 was also filed on 29 June 2007, and, as I have said, it is the subject of an order which I made yesterday.  Mr Healy seeks an order for costs and he seeks costs on an indemnity basis.  He has not though been able to indicate how much costs he seeks and he asks that they be taxed. 

7. He says that when one looks at the relevant factors in Section 117(2A) there are circumstances here which would justify an order for costs. In my view though the only possible basis for an order for costs would be the claim that the wife could have compromised the application in the way that she ultimately did earlier than she did. In my view, though, that is simply not the case. This was a situation where the creditors were owed money by a company of which the husband is the sole director. Respectively, G Lawyers were owed $14,503.80, S were owed $3,962.64 and W Nominees Pty Ltd were owed $1,881.00. As I understand the claim of the interveners, that relates to work done in relation to the sale of what is described as N product, which resulted in an amount of $200,000.00 being deposited in an account held by the parties as trustees for the company and that being the subject of an injunction made by this court on 31 May 2006. The intention of the injunction and the holding of the moneys was that the fate of those moneys needed to be determined, ultimately, as part of the parties' property settlement application.

8. Under the Family Law Act, creditors whose interests may be affected are entitled to intervene in proceedings.  That is what these three creditors did this year; they intervened in the proceedings.  However, the order they sought was that the wife and the husband forthwith remit to the company the $200,000.00, together with all accrued interest, held by them in a joint account on behalf of the company pursuant to the order of this court made on 31 May 2006.  How the interveners could ever expect to succeed on an application like that is beyond me.  They are entitled to be paid certain amounts and thus they have an interest in these proceedings in terms of what the fate of the $200,000.00 was.  However that had to await the outcome of the property settlement proceedings, and the wife was perfectly entitled to say, "Well, I'm not going to agree to that money being paid out yet.  We have to go through the property settlement proceedings."  Thus to suggest that the wife should have compromised the claim earlier than she did is in my view not justified.  Thus there is no basis for any order for costs against the wife in relation to this application, let alone indemnity costs which I will not even address in the circumstances.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland

Associate: 

Date: